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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Exhibit
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Description
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99.1
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99.2
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104
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Cover Page Interactive Data File (embedded within the Inline XBRL document).
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FRESHPET, INC.
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Date: May 8, 2023
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By:
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/s/ Todd Cunfer
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Name: Todd Cunfer
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Title: Chief Financial Officer
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Exhibit 99.1
Freshpet, Inc. Reports First Quarter 2023 Financial Results
Continued Strong Topline Growth
Strong operating performance drove Adjusted EBITDA improvement
Re-affirms net sales & Adjusted EBITDA guidance
SECAUCUS, N.J. – May 8, 2023 – Freshpet, Inc. (“Freshpet” or the “Company”) (Nasdaq: FRPT) today reported financial results for its first quarter ended March 31, 2023.
First Quarter 2023 Financial Highlights Compared to Prior Year Period
|
● |
Net sales of $167.5 million, an increase of 26.7% |
|
● |
Net loss of $24.8 million, compared with prior year net loss of $17.5 million |
|
● |
Adjusted EBITDA of $3.0 million, compared to prior year of $(0.3) million.1 |
"We are off to a very strong start to 2023 behind our recently launched Fresh Future plan. That plan promised renewed focus on improving profitability while continuing to drive strong growth. And our first quarter results demonstrate meaningful progress against those goals – particularly in our focus areas of quality and logistics,” commented Billy Cyr, Freshpet’s Chief Executive Officer. “With our strengthened organization and the Ennis Kitchen on-line, we believe we can continue to improve on that performance and deliver the significant value creation that one would expect from a high-growth brand like Freshpet."
Net sales increased 26.7% to $167.5 million for the first quarter of 2023 compared to $132.2 million for the first quarter of 2022. Net sales for the first quarter of 2023 were driven by both velocity gains, and pricing.
Gross profit was $50.8 million, or 30.3% as a percentage of net sales, for the first quarter of 2023, compared to $44.8 million, or 33.9% as a percentage of net sales, in the prior year period. The decrease in reported gross profit as a percentage of net sales was primarily due to increased depreciation expense from the expansion in capacity, increased share-based compensation, and unabsorbed plant cost from the Ennis Kitchen, partially offset by reduced input and quality cost as a percentage of net sales. For the first quarter of 2023, Adjusted Gross Profit was $64.4 million, or 38.5% as a percentage of net sales, compared to $50.6 million, or 38.3% as a percentage of net sales, in the prior year period. Adjusted Gross Profit is a non-GAAP financial measure defined under “Non-GAAP Measures” and is reconciled to gross profit in the financial tables that accompany this release.
Selling, general and administrative expenses (“SG&A”) were $72.3 million for the first quarter of 2023 compared to $60.6 million in the prior year period. As a percentage of net sales, SG&A decreased to 43.1% for the first quarter of 2023 compared to 45.9% in the prior year period. The decrease of 280 basis points in SG&A as a percentage of net sales was mainly a result of increased leverage on depreciation and option expense as the business scales, and reduced media and logistics cost as a percentage of net sales. Adjusted SG&A for the first quarter of 2023 was $61.5 million, or 36.7% as a percentage of net sales, compared to $51.2 million, or 38.7% as a percentage of net sales, in the prior year period. Adjusted SG&A is a non-GAAP financial measure defined under “Non-GAAP Measures” and is reconciled to SG&A in the financial tables that accompany this release.
Net loss was $24.8 million for the first quarter of 2023 compared to net loss of $17.5 million for the prior year period. The increase in net loss was due to increased SG&A, which includes increased media spend of $4.4 million, higher depreciation and increased unabsorbed plant cost, partially offset by contribution profit from higher sales.
1 Adjusted EBITDA, as well as certain other measures in this release, is a non-GAAP financial measure. See "Non-GAAP Measures" for how we define these measures and the financial tables that accompany this release for reconciliations of these measures to the closest comparable GAAP measures.
Adjusted EBITDA was $3.0 million for the first quarter of 2023, compared to a loss of $(0.3) million in the prior year period. The increase in Adjusted EBITDA was a result of higher Adjusted Gross Profit due to sales growth and leverage on quality and input costs, partially offset by higher Adjusted SG&A expenses. Adjusted EBITDA is a non-GAAP financial measure defined under “Non-GAAP Measures” and is reconciled to net loss in the financial tables that accompany this release.
Balance Sheet
On March 20, 2023 we issued $402.5 million Convertible Senior Notes at 3.0% interest rates due 2028. In connection with the pricing of the Convertible Senior Notes we used $66.2 million of the net proceeds to enter into a privately negotiated capped call transaction. The capped call transaction results in an economic conversion price of $120.23 per share on the Convertible Senior Notes, which represents a premium of 120% over the last reported sale price of our common stock of $54.65 per share on March 15, 2023,
As of March 31, 2023, the Company had cash and cash equivalents and short-term investments of $386.5 million with $391.5 million of debt outstanding net of $11.0 million of fees.
We will utilize our balance sheet to support our on-going capital needs and enable us to continue to execute our long-term capacity plan
Outlook
For full year 2023, the Company reiterates its full year underlying guidance on Net Sales and Adjusted EBITDA. The Company expects the following results:
|
● |
Net sales of ~$750 million, an increase of ~26% from 2022. |
|
● |
Adjusted EBITDA of at least $50 million. |
|
● |
Capital expenditures for 2023 of ~$240 million. |
The Company does not provide guidance for the most directly comparable GAAP measure, net income, and similarly cannot provide a reconciliation between its forecasted adjusted EBITDA and net income metrics without unreasonable effort due to the unavailability of reliable estimates for certain components of net income and the respective reconciliations, including the timing of and amount of costs of goods sold and selling, general and administrative expenses. These items are not within the Company's control and may vary greatly between periods and could significantly impact future results.
Conference Call & Earnings Presentation Webcast Information
As previously announced, today, May 8, 2023, the Company will host a conference call beginning at 8:00 a.m. Eastern Time with members of its leadership team. The conference call webcast will be available live over the Internet through the "Investors" section of the Company's website at www.freshpet.com. To participate on the live call, listeners in North America may dial (877) 407-0792 and international listeners may dial (201) 689-8263.
A replay of the conference call will be archived on the Company's website and telephonic playback will be available from 12:00 p.m. Eastern Time today through May 22, 2023. North American listeners may dial (844) 512-2921 and international listeners may dial (412) 317-6671; the passcode is 13737644
About Freshpet
Freshpet’s mission is to improve the lives of dogs and cats through the power of fresh, real food. Freshpet foods are blends of fresh meats, vegetables and fruits farmed locally and made at our Freshpet Kitchens. We thoughtfully prepare our foods using natural ingredients, cooking them in small batches at lower temperatures to preserve the natural goodness of the ingredients. Freshpet foods and treats are kept refrigerated from the moment they are made until they arrive at Freshpet Fridges in your local market.
Our foods are available in select mass, grocery (including online), natural food, club, and pet specialty retailers across the United States, Canada and Europe. From the care, we take to source our ingredients and make our food, to the moment it reaches your home, our integrity, transparency and social responsibility are the way we like to run our business. To learn more, visit www.freshpet.com.
Connect with Freshpet:
https://www.facebook.com/Freshpet
https://twitter.com/Freshpet
http://instagram.com/Freshpet
http://pinterest.com/Freshpet
https://www.tiktok.com/@Freshpet
https://en.wikipedia.org/wiki/Freshpet
https://www.youtube.com/user/freshpet400
Forward Looking Statements
Certain statements in this release constitute “forward-looking” statements, including statements relating to our long-term capacity planning, net sales guidance and Adjusted EBITDA guidance. These statements are based on management's current opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results. These forward-looking statements, including our updated guidance, are only predictions, not historical fact, and involve certain risks and uncertainties, as well as assumptions. Actual results, levels of activity, performance, achievements and events could differ materially from those stated, anticipated or implied by such forward-looking statements. While Freshpet believes that its assumptions are reasonable, it is very difficult to predict the impact of known factors, and, of course, it is impossible to anticipate all factors that could affect actual results. There are several risks and uncertainties that could cause actual results to differ materially from forward-looking statements made herein including, most prominently, the risks discussed under the heading “Risk Factors” in the Company's latest annual report on Form 10-K and its quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. Such forward-looking statements are made only as of the date of this release. Freshpet undertakes no obligation to publicly update or revise any forward-looking statement because of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.
Non-GAAP Financial Measures
Freshpet uses the following non-GAAP financial measures in its financial communications. These non-GAAP financial measures should be considered as supplements to the GAAP reported measures, should not be considered replacements for, or superior to, the GAAP measures and may not be comparable to similarly named measures used by other companies.
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● |
Adjusted Gross Profit |
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● |
Adjusted Gross Profit as a % of net sales (Adjusted Gross Margin) |
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● |
Adjusted SG&A |
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● |
Adjusted SG&A as a % of net sales |
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● |
EBITDA |
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● |
Adjusted EBITDA |
|
● |
Adjusted EBITDA as a % of net sales |
Adjusted Gross Profit: Freshpet defines Adjusted Gross Profit as gross profit before depreciation expense and non-cash share-based compensation.
Adjusted SG&A Expenses: Freshpet defines Adjusted SG&A as SG&A expenses before depreciation and amortization, non-cash share-based compensation, implementation and other costs associated with the implementation of an enterprise resource planning ("ERP") system, fees related to the Capped Call Transactions purchases, loss on disposal of equipment, and advisory fees related to activism engagement.
EBITDA and Adjusted EBITDA: EBITDA represents net income (loss) plus interest expense net of interest income, income tax expense and depreciation and amortization expense, and Adjusted EBITDA represents EBITDA plus loss on equity method investment, non-cash share-based compensation expense, implementation and other costs associated with the implementation of an ERP system, loss on disposal of equipment, fees related to the Capped Call Transactions purchases, and advisory fees related to activism engagement.
Management believes that the non-GAAP financial measures are meaningful to investors because they provide a view of the Company with respect to ongoing operating results. The non-GAAP financial measures are shown as supplemental disclosures in this release because they are widely used by the investment community for analysis and comparative evaluation. They also provide additional metrics to evaluate the Company’s operations and, when considered with both the Company’s GAAP results and the reconciliation to the most comparable GAAP measures, provide a more complete understanding of the Company’s business than could be obtained absent this disclosure. The non-GAAP measures are not and should not be considered an alternative to the most comparable GAAP measures or any other figure calculated in accordance with GAAP, or as an indicator of operating performance. The Company’s calculation of the non-GAAP financial measures may differ from methods used by other companies. Management believes that the non-GAAP measures are important to an understanding of the Company's overall operating results in the periods presented. The non-GAAP financial measures are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance.
Investor Contact:
ICR
Jeff Sonnek
646-277-1263
Jeff.sonnek@icrinc.com
Media Contact:
Freshpet@edelmansmithfield.com
FRESHPET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
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March 31, |
December 31, |
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2023 |
2022 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
$ | 337,143 | $ | 132,735 | ||||
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Short-term investments |
49,326 | — | ||||||
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Accounts receivable, net of allowance for doubtful accounts |
49,513 | 57,572 | ||||||
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Inventories, net |
66,319 | 58,290 | ||||||
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Prepaid expenses |
7,751 | 9,778 | ||||||
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Other current assets |
3,092 | 3,590 | ||||||
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Total Current Assets |
513,144 | 261,965 | ||||||
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Property, plant and equipment, net |
826,152 | 800,586 | ||||||
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Deposits on equipment |
2,936 | 3,823 | ||||||
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Operating lease right of use assets |
4,808 | 5,165 | ||||||
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Equity method investment |
— | 25,418 | ||||||
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Long term investment in equity securities |
24,438 | — | ||||||
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Other assets |
28,539 | 28,426 | ||||||
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Total Assets |
$ | 1,400,017 | $ | 1,125,383 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
$ | 26,391 | $ | 55,088 | ||||
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Accrued expenses |
27,805 | 33,016 | ||||||
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Current operating lease liabilities |
1,543 | 1,510 | ||||||
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Total Current Liabilities |
$ | 55,739 | $ | 89,614 | ||||
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Convertible senior notes |
391,567 | — | ||||||
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Long term operating lease liabilities |
3,804 | 4,200 | ||||||
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Total Liabilities |
$ | 451,110 | $ | 93,814 | ||||
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STOCKHOLDERS' EQUITY: |
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Common stock — voting, $0.001 par value, 200,000 shares authorized, 48,123 issued and 48,109 outstanding on March 31, 2023, and 48,051 issued and 48,037 outstanding on December 31, 2022 |
48 | 48 | ||||||
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Additional paid-in capital |
1,267,642 | 1,325,524 | ||||||
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Accumulated deficit |
(319,903 | ) | (295,117 | ) | ||||
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Accumulated other comprehensive income |
1,376 | 1,370 | ||||||
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Treasury stock, at cost — 14 shares on March 31, 2023 and on December 31, 2022 |
(256 | ) | (256 | ) | ||||
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Total Stockholders' Equity |
948,907 | 1,031,569 | ||||||
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Total Liabilities and Stockholders' Equity |
$ | 1,400,017 | $ | 1,125,383 | ||||
FRESHPET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per share data)
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For the Three Months Ended |
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March 31, |
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2023 |
2022 |
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NET SALES |
$ | 167,522 | $ | 132,171 | ||||
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COST OF GOODS SOLD |
116,762 | 87,419 | ||||||
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GROSS PROFIT |
50,760 | 44,753 | ||||||
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SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES |
72,271 | 60,631 | ||||||
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LOSS FROM OPERATIONS |
(21,511 | ) | (15,878 | ) | ||||
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OTHER (EXPENSES)/INCOME: |
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Other Income, net |
946 | 258 | ||||||
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Interest Expense |
(3,171 | ) | (571 | ) | ||||
| (2,225 | ) | (313 | ) | |||||
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LOSS BEFORE INCOME TAXES |
(23,736 | ) | (16,191 | ) | ||||
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INCOME TAX EXPENSE |
70 | 41 | ||||||
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LOSS ON EQUITY METHOD INVESTMENT |
980 | 1,310 | ||||||
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LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS |
$ | (24,786 | ) | $ | (17,542 | ) | ||
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OTHER COMPREHENSIVE (LOSS) INCOME: |
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Change in foreign currency translation |
$ | 6 | (362 | ) | ||||
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TOTAL OTHER COMPREHENSIVE INCOME (LOSS) |
6 | (362 | ) | |||||
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TOTAL COMPREHENSIVE LOSS |
$ | (24,780 | ) | $ | (17,904 | ) | ||
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NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS |
||||||||
|
-BASIC |
$ | (0.52 | ) | $ | (0.40 | ) | ||
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-DILUTED |
$ | (0.52 | ) | $ | (0.40 | ) | ||
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WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING USED IN COMPUTING NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS |
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-BASIC |
48,047 | 43,437 | ||||||
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-DILUTED |
48,047 | 43,437 | ||||||
FRESHPET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
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For the Three Months Ended |
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March 31, |
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2023 |
2022 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss |
$ | (24,786 | ) | $ | (17,542 | ) | ||
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Adjustments to reconcile net loss to net cash flows used in operating activities: |
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Provision for loss (gains) on accounts receivable |
(2 | ) | (25 | ) | ||||
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Loss on disposal of equipment |
268 | 43 | ||||||
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Share-based compensation |
8,415 | 6,295 | ||||||
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Inventory obsolescence |
(29 | ) | (149 | ) | ||||
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Depreciation and amortization |
14,492 | 8,007 | ||||||
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Write-off and amortization of deferred financing costs and loan discount |
2,478 | 132 | ||||||
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Change in operating lease right of use asset |
357 | 310 | ||||||
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Loss on equity method investment |
980 | 1,310 | ||||||
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Changes in operating assets and liabilities: |
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Accounts receivable |
9,182 | (26,653 | ) | |||||
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Inventories |
(8,000 | ) | (9,588 | ) | ||||
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Prepaid expenses and other current assets |
2,525 | 717 | ||||||
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Other assets |
(3,664 | ) | (990 | ) | ||||
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Accounts payable |
(10,724 | ) | 5,449 | |||||
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Accrued expenses |
(4,869 | ) | (1,811 | ) | ||||
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Other lease liabilities |
(363 | ) | (290 | ) | ||||
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Net cash flows used in operating activities |
(13,740 | ) | (34,785 | ) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchase of short-term investments |
(49,326 | ) | — | |||||
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Investments in equity method investment |
— | (3,294 | ) | |||||
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Acquisitions of property, plant and equipment, software and deposits on equipment |
(58,039 | ) | (55,888 | ) | ||||
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Net cash flows used in investing activities |
(107,365 | ) | (59,182 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from exercise of options to purchase common stock |
834 | 232 | ||||||
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Tax withholdings related to net shares settlements of restricted stock units |
(602 | ) | (323 | ) | ||||
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Proceeds from borrowings under Credit Facility |
— | 51,000 | ||||||
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Purchase of capped call option |
(66,211 | ) | — | |||||
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Proceeds from issuance of convertible senior notes |
393,518 | — | ||||||
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Debt issuance costs |
(2,026 | ) | — | |||||
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Net cash flows provided by financing activities |
325,513 | 50,909 | ||||||
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NET CHANGE IN CASH AND CASH EQUIVALENTS |
204,408 | (43,058 | ) | |||||
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CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR |
132,735 | 72,788 | ||||||
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CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 337,143 | $ | 29,730 | ||||
FRESHPET, INC. AND SUBSIDIARIES
RECONCILIATION BETWEEN GROSS PROFIT AND ADJUSTED GROSS PROFIT
|
Three Months Ended |
||||||||
|
March 31, |
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|
2023 |
2022 |
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(Dollars in thousands) |
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Gross profit |
$ | 50,760 | $ | 44,753 | ||||
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Depreciation expense |
10,721 | 4,701 | ||||||
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Non-cash share-based compensation |
2,956 | 1,168 | ||||||
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Adjusted Gross Profit |
$ | 64,437 | $ | 50,622 | ||||
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Adjusted Gross Profit as a % of Net Sales |
38.5 | % | 38.3 | % | ||||
FRESHPET, INC. AND SUBSIDIARIES
RECONCILIATION BETWEEN SG&A EXPENSES AND ADJUSTED SG&A EXPENSES
|
Three Months Ended |
||||||||
|
March 31, |
||||||||
|
2023 |
2022 |
|||||||
|
(Dollars in thousands) |
||||||||
|
SG&A expenses |
$ | 72,271 | $ | 60,631 | ||||
|
Depreciation and amortization expense |
3,771 | 3,285 | ||||||
|
Non-cash share-based compensation |
5,459 | 5,127 | ||||||
|
Loss on disposal of equipment |
268 | 43 | ||||||
|
Enterprise Resource Planning (a) |
801 | 1,018 | ||||||
|
Capped Call Transactions fees (b) |
113 | — | ||||||
|
Activism engagement (c) |
389 | — | ||||||
|
Adjusted SG&A Expenses |
$ | 61,470 | $ | 51,158 | ||||
|
Adjusted SG&A Expenses as a % of Net Sales |
36.7 | % | 38.7 | % | ||||
| (a) | Represents implementation, amortization of deferred implementation costs and other costs associated with the implementation of an ERP system. |
| (b) | Represents fees associated with the Capped Call Transactions purchases. |
| (c) | Represents advisory fees related to activism engagement. |
FRESHPET, INC. AND SUBSIDIARIES
RECONCILIATION BETWEEN NET (LOSS) AND ADJUSTED EBITDA
|
Three Months Ended |
||||||||
|
March 31, |
||||||||
|
2023 |
2022 |
|||||||
|
(Dollars in thousands) |
||||||||
|
Net loss |
$ | (24,786 | ) | $ | (17,542 | ) | ||
|
Depreciation and amortization |
14,492 | 7,986 | ||||||
|
Interest expense, net of interest income |
2,225 | 571 | ||||||
|
Income tax expense |
70 | 41 | ||||||
|
EBITDA |
$ | (7,999 | ) | $ | (8,944 | ) | ||
|
Loss on equity method investment |
980 | 1,310 | ||||||
|
Loss on disposal of equipment |
268 | 43 | ||||||
|
Non-cash share-based compensation |
8,415 | 6,295 | ||||||
|
Enterprise Resource Planning (a) |
801 | 1,018 | ||||||
|
Capped Call Transactions fees (b) |
113 | — | ||||||
|
Activism engagement (c) |
389 | — | ||||||
|
Adjusted EBITDA |
$ | 2,967 | $ | (278 | ) | |||
|
Adjusted EBITDA as a % of Net Sales |
1.8 | % | -0.2 | % | ||||
| (a) | Represents implementation, amortization of deferred implementation costs and other costs associated with the implementation of an ERP system. |
| (b) | Represents fees associated with the Capped Call Transactions purchases. |
| (c) |
Represents advisory fees related to activism engagement. |
Exhibit 99.2
